2025 (6) TMI 1882 - HC - Money Laundering

Money Laundering - seeking grant of bail - investigation not completed within the statutory period - existence of evidence against the petitioner to implicate him in this case or not - applicability of Section 45 of PMLA 2002. Whether the petitioners are entitled to statutory bail or not? - HELD THAT - After going through the defects noted by the Special Judge and the reply to it by the respondents it is opined that those are minor defects and therefore based on the same the petitioners are not entitled to default bail. The standing counsel for the respondents submitted that the investigation against the petitioners were over at the time of filing the complaint. Hence the petitioners are not entitled default bail. Hence that point is decided against the petitioners. Whether there are reasonable grounds for believing that the petitioners are not guilty of the offences alleged and that they are not likely to commit any offence while on bail? - statements filed under Section 50 of Act 2002 to prove the case - HELD THAT - In Vijay Madanlal Choudhary and Others v. Union of India and Others 2022 (7) TMI 1316 - SUPREME COURT (LB) the Apex Court considered the admissibility of Section 50 of Act 2002 in detail. The Apex Court observed that at the stage of the issue of summons the person cannot claim protection under Article 20(3) of the Constitution. However if his/her statement is recorded after a formal arrest by the ED official the consequences of Article 20(3) or Section 25 of the Evidence Act may come into play to urge that the same being in the nature of confession shall not be proved against him. Further it would not preclude the prosecution from proceeding against such a person including for consequences under Section 63 of Act 2002 on the basis of other tangible material to indicate the falsity of his claim. The contention of the petitioners is that there are only statements under Section 50 of Act 2002 against the petitioners. A perusal of the complaint would show that those statements were recorded after the arrest of the petitioners. If that is the only evidence it is a matter to be considered whether the same is admissible in light of the dictum laid down in Vijay Madanlal Choudhary s case and in Kanhaiya Prasad s case 2025 (2) TMI 563 - SUPREME COURT . But the Standing Counsel submitted that in addition to the same there are other materials also against the petitioners. In addition to the statements under Section 50 of Act 2002 there are materials against the petitioners. There are no position to neglect the materials made available by the prosecution. It cannot be said that there are only statements under Section 50 of the Act 2002. Based on the above materials mentioned above it cannot be said that there are reasonable grounds for believing that the accused are not guilty and that they are not likely to commit any offences. It is true that the counsel for the petitioner in B.A.No. 741 of 2025 argued based on Annexure A11. Even if the same is admitted there are more amounts came to the account of that petitioner is the case of the prosecution. Except Annexure A11 no other documents are produced by the petitioner. There is no merit in the bail applications - bail applications are dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the petitioners are entitled to statutory (default) bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023, due to non-completion of investigation within the stipulated period.

- The admissibility and evidentiary value of statements recorded under Section 50 of the Prevention of Money Laundering Act, 2002 (hereinafter 'Act 2002'), especially when relied upon by the prosecution.

- Whether the petitioners are entitled to bail under Section 45 of the Act 2002, considering the stringent conditions prescribed therein for offences punishable with imprisonment exceeding three years.

- Evaluation of the sufficiency and nature of evidence against the petitioners, including financial transactions, statements of witnesses, and other documentary materials.

- The applicability of relevant judicial precedents on statutory bail and the evidentiary scope of Section 50 statements in money laundering cases.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Statutory Bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023

Relevant legal framework and precedents: The petitioners contended that since the investigation was not completed within the prescribed time, they are entitled to statutory bail. The Court examined the filing and return of the final report (charge sheet) and the defects therein. The Court relied heavily on the judgment in Vimal K. Mohanan's case, which clarified that the entitlement to default bail depends on completion of investigation rather than mere filing of the final report. Minor defects in the charge sheet do not confer a right to default bail if the investigation is complete and the defects are curable.

Court's interpretation and reasoning: The Court scrutinized the report by the Special Judge (PML Act Cases), Kozhikode, which noted fifteen defects in the initial charge sheet filed by the Enforcement Directorate (ED). The defects ranged from non-inclusion of all suspected persons as parties, absence of certified copies of FIRs, missing retention orders, uncertified documents, to incorrect dates on certain documents. The charge sheet was returned for curing these defects and was subsequently re-presented and taken on file.

The Court held that these defects were minor and curable and did not amount to incomplete investigation. The investigation was held to be complete at the time of filing the charge sheet. Therefore, the petitioners were not entitled to default bail under the statutory provisions.

Application of law to facts: The petitioners' argument that the defects were fatal was rejected. The Court emphasized that the returned charge sheet with minor defects, once cured and re-filed, cannot trigger the statutory bail provisions. The investigation having been completed, the petitioners' application for default bail was denied.

Conclusion: The petitioners are not entitled to statutory bail under Section 483 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

Issue 2: Admissibility and Reliance on Statements under Section 50 of the Act 2002

Relevant legal framework and precedents: Section 50 of the Act 2002 empowers authorities to summon persons for inquiry and record their statements. The petitioners challenged the reliance on such statements, contending they are inadmissible and cannot be the sole basis for prosecution. The Court referred to the Supreme Court's rulings in Vijay Madanlal Choudhary and Others v. Union of India and Others, and Union of India through Assistant Director v. Kanhaiya Prasad, which clarified the scope and admissibility of Section 50 statements.

Court's interpretation and reasoning: The Court noted that statements under Section 50 are not hit by the protections under Article 20(3) of the Constitution (protection against self-incrimination), as the authorities under the Act 2002 are not police officers. The Supreme Court held that such statements, recorded pursuant to summons, are admissible and can be relied upon as evidence. However, the protection under Section 25 of the Evidence Act (protection against involuntary confessions) may apply depending on the circumstances.

Application of law to facts: The petitioners' contention that only Section 50 statements were relied upon was examined in light of the above precedents. The Court found that the statements were recorded post-arrest, and while their admissibility is subject to evidentiary rules, they are not per se inadmissible. More importantly, the prosecution placed on record additional materials beyond these statements.

Conclusion: The statements under Section 50 of the Act 2002 are admissible and can be considered along with other evidence. The petitioners' challenge to their admissibility was rejected.

Issue 3: Bail under Section 45 of the Act 2002 - Conditions and Application

Relevant legal framework: Section 45(1) of the Act 2002 provides that offences under the Act are cognizable and non-bailable except under strict conditions: the Public Prosecutor must be heard, and the Court must be satisfied there are reasonable grounds to believe the accused is not guilty and will not commit further offences. There are exceptions for minors, women, sick or infirm persons, or cases involving money laundering under one crore rupees.

Court's interpretation and reasoning: The Court analyzed whether the petitioners satisfied the stringent conditions for bail under Section 45. The burden is on the accused to demonstrate reasonable grounds for believing they are not guilty and pose no risk of reoffending.

Application of law to facts: The Court considered the prosecution's evidence, including statements of witnesses and the accused under Section 50, financial records, and property acquisitions linked to the accused. The petitioners failed to produce credible documentary evidence to counter the prosecution's case, such as agreements or records supporting their claim of legitimate financial transactions. The Court found no reasonable grounds to believe the accused were not guilty or unlikely to commit offences while on bail.

Treatment of competing arguments: The petitioners argued their non-involvement, absence as directors or shareholders, and lack of evidence except Section 50 statements. The Court rejected these contentions, highlighting corroborative materials and witness statements implicating the accused. The petitioners' personal circumstances (minor children, aged parents) were noted but insufficient to outweigh the statutory requirements.

Conclusion: The petitioners did not satisfy the conditions for bail under Section 45 of the Act 2002. Bail was rightly refused.

Issue 4: Sufficiency and Nature of Evidence Against the Petitioners

Relevant evidence and findings: The prosecution presented a detailed note enumerating evidence against the petitioners, including:

• Statements of company employees and witnesses under Section 50 indicating that the accused controlled and misappropriated funds from Kannur Urban Nidhi Limited (KUNL) and Anytime Money Pvt. Ltd. (ATM).
• Admissions by the accused regarding receipt and diversion of substantial sums (e.g., Rs. 17.5 crores) for personal use and business expenses.
• Financial transactions showing transfer of crores of rupees to the accused's firms and family accounts.
• Documentary evidence of property acquisitions funded by diverted money.
• Witness testimony about cash withdrawals and illegal lending activities linked to the accused.

Court's reasoning: The Court found that the evidence was not limited to statements under Section 50 but included tangible financial and documentary proof corroborating the allegations. The accused failed to produce any agreements or documents to substantiate their claims of legitimate transactions.

Application of law to facts: The Court applied the legal standards for bail and the presumption of innocence but emphasized that bail is not a matter of right, especially in serious offences involving money laundering of large sums. The presence of credible evidence negated the petitioners' claims of innocence at this stage.

Conclusion: The evidence on record justified the denial of bail and supported the continuation of prosecution.

3. SIGNIFICANT HOLDINGS

"The criteria for deciding the entitlement for default bail is completion of the investigation and not filing of the final report. The word 'final report' is not mentioned in S.167. Therefore, when faced with the Public Prosecutor's application seeking extension, or that of the accused demanding statutory bail, the court's consideration should be whether the final report was filed after completing the investigation in all respects, minor defects in the report, by itself, will not confer the accused with any right to be enlarged on default bail."

"No person accused of an offence punishable for a term of imprisonment of more than three years under Part-A of the Schedule shall be released on bail or on his own bond unless the Public Prosecutor has been given an opportunity to oppose the application for such release; and where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail."

"The statements recorded by authorities under the 2002 Act, of persons involved in the commission of the offence of money-laundering or the witnesses for the purposes of inquiry/investigation, cannot be hit by the vice of Article 20(3) of the Constitution or for that matter, Article 21 being procedure established by law."

"If the final report is filed without completing the investigation, in order to stultify the mandate of S.167(2) and later returned to the investigating officer for completing the investigation, that would definitely entitle the accused to demand that he be released on default bail, if the final report, after completing the investigation and curing the defects, is not re-submitted in court before the 180th day."

Final determinations:

• The petitioners are not entitled to statutory bail as the investigation was complete and the charge sheet defects were minor and curable.
• Statements under Section 50 of the Act 2002 are admissible and can be relied upon as evidence, subject to evidentiary rules.
• The petitioners failed to satisfy the stringent conditions for bail under Section 45 of the Act 2002, given the evidence against them.
• The prosecution's case is supported by multiple materials beyond Section 50 statements, including financial transactions and witness testimonies, negating the petitioners' claims of innocence.
• The bail applications are dismissed.